Viad Corp. 2019 Form 10-K Summary
Entity note: The supplied filing is Viad Corp.’s Form 10-K, not a standalone filing for Pursuit Attractions & Hospitality, Inc. It reports Viad’s consolidated results, including GES and Pursuit. The fiscal year ended December 31, 2019; quarterly data includes the fourth quarter.
Business context and reporting period
Viad operates two business groups: GES, a live-events services provider, and Pursuit, an attractions and hospitality company with operations in iconic destinations. Reportable segments are GES North America, GES EMEA, and Pursuit. Pursuit’s activity is highly seasonal: 85% of its 2019 revenue was earned in the second and third quarters.
Financial performance and liquidity
| Metric | 2019 | 2018 | Change |
|---|---|---|---|
| Revenue | $1,371.7 million | $1,296.2 million | +5.8% |
| Income from continuing operations | $23.6 million | $47.9 million | −50.7% |
| Net income attributable to Viad | $22.0 million | $49.2 million | −55.2% |
| Diluted continuing-operations EPS attributable to Viad common stockholders | $1.02 | $2.33 | −56.2% |
| Segment operating income (non-GAAP) | $90.2 million | $88.5 million | +1.9% |
| Cash provided by operating activities | $108.1 million | $90.6 million | +$17.5 million |
| Capital expenditures | $76.1 million | $83.3 million | −$7.2 million |
| Cash and cash equivalents at year-end | $62.0 million | $44.9 million | +$17.1 million |
| Total debt and finance lease obligations | $340.5 million | $230.1 million | +$110.4 million |
Operating cash flow exceeded capital expenditures by approximately $32.0 million, before acquisitions, financing, and other cash movements. Investing activities used $165.6 million, including $91.0 million of acquisition-related cash payments. Financing activities provided $73.5 million, driven by borrowing proceeds. The company reported $317.1 million of credit-facility borrowings and $134.9 million of remaining capacity under its $450 million revolving facility. The company stated existing liquidity should be sufficient for operations and capital commitments for at least 12 months.
Viad’s credit-facility leverage ratio was 2.48x and interest coverage ratio was 9.23x at year-end; it reported compliance with all covenants. Most revolving-credit borrowings were variable-rate and LIBOR-indexed. The company paid $8.1 million in common dividends in 2019 and declared $0.40 per share.
Material changes versus the prior comparable period
- Revenue increased $75.5 million, supported by GES corporate-client growth and new wins, Pursuit’s underlying growth, new and refreshed Pursuit projects, and $19.9 million of revenue from the Mountain Park Lodges and Belton Chalet acquisitions. Headwinds included approximately $15 million of negative GES show rotation and $13.3 million of unfavorable foreign-exchange impact.
- GES revenue rose 3.4% as reported, while segment operating income fell 9.3% to $35.9 million. Organic GES revenue increased 4.4%; organic segment operating income declined 8.1%.
- Pursuit revenue rose 20.3% to $222.8 million, including acquisitions; organic revenue increased 10.7%. Segment operating income increased 11.0% to $54.3 million, but organic segment operating income was essentially flat, down 0.2%.
- Net income fell substantially despite higher revenue and segment operating income. The decline reflected the pension-plan withdrawal charge, legal settlement, higher restructuring expense, and impairment charges; lower income-tax expense partly offset these items.
- Interest expense increased 47.3% to $14.2 million, primarily due to higher debt balances. Total assets rose to $1.319 billion from $922.5 million, reflecting acquisitions, investment, and adoption of lease accounting.
Outlook, commentary, risks and unusual items
- No consolidated numerical revenue or earnings guidance is provided. Management described growth priorities for Pursuit as refreshing existing assets, building new attractions, and acquiring strategic assets. Planned projects included Sky Lagoon and FlyOver Las Vegas, both anticipated to open in 2021, and FlyOver Toronto, anticipated to open in 2022.
- Key 2019 charges included $15.7 million for withdrawal from the underfunded Central States Pension Plan, an $8.5 million GES legal settlement, $8.4 million of restructuring charges, and $5.3 million of impairment charges, primarily associated with GES’s UK audio-visual production business. The legal settlement was recorded in the first quarter; most of the pension withdrawal charge was recorded in the second quarter, with a further amount in the fourth quarter.
- The effective tax rate was 9.6%, versus 26.3% in 2018; the 2019 rate benefited partly from a $4.5 million Alberta deferred-tax remeasurement benefit.
- Quarterly results were uneven. Fourth-quarter 2019 revenue was $321.3 million and Viad reported a $5.4 million net loss attributable to Viad, including the $5.3 million impairment charge. The filing’s selected quarterly table reports a $14.9 million loss from continuing operations before tax in Q4.
- Principal risks include economic weakness affecting exhibitions and discretionary travel, major-client retention and venue insourcing, show rotation, travel disruptions and pandemics, weather and natural disasters, project delays and cost overruns, union labor and multi-employer pension obligations, foreign exchange exposure, cybersecurity and privacy compliance, Brexit-related uncertainty, and variable interest rates/LIBOR transition. The filing specifically noted the then-recent coronavirus outbreak as a travel-industry risk.
- Viad reported $79.3 million of maximum potential future payments under guarantees of subsidiary lease obligations and $2.3 million of environmental remediation liabilities related to previously sold operations. Management did not expect unresolved litigation or environmental matters, after reserves and insurance, to materially affect results.
- The auditor issued unqualified opinions on the financial statements and internal controls. Self-insurance reserves were identified as a critical audit matter because estimating reported and unreported claims involves significant judgment. Management and the auditor excluded Mountain Park Lodges from the 2019 internal-control assessment; it represented 9.8% of assets and 1.4% of revenue.
Important facts for investors to verify
- Reconcile the metadata’s Pursuit-focused company description with the actual registrant, Viad Corp, and distinguish consolidated results from Pursuit-only performance.
- Review the $15.7 million pension withdrawal liability, its expected payment profile, and potential future multi-employer plan contribution or withdrawal exposure.
- Assess debt maturity and refinancing risk: $313.4 million of credit-facility principal was classified as due in 2020, although the revolving facility’s stated maturity is October 2023; confirm the applicable repayment terms and availability.
- Track cash returns against planned investment: 2019 acquisitions and development coincided with $91.0 million of acquisition cash outflows and $76.1 million of capital expenditures.
- Monitor organic performance and margins separately from acquisition-driven growth, particularly GES operating income and Pursuit’s nearly flat organic segment operating income.
- Evaluate the assumptions behind the UK audio-visual impairment and self-insurance reserves, as well as the execution, cost, and opening schedules of Pursuit’s development projects.